October 21, 2020 Payroll & Tax Support, Year-End Payroll Planning

2020 Payroll Issues You Need to Keep an Eye On

Those of you keeping an eye on payroll issues affecting 2020 may already have taken note that the New Year holiday of January 1, 2021 will fall on a Friday. Wise consultant and Vice President of the American Payroll Association, Ginnette Clark, CPP, outlines some of the year-end issues coming up, starting with why the new year starting on the last day of the working week impacts payroll.

Check Your Payroll Calendar

“Friday, January 1st would have been the first pay date of 2021 for many companies but it won’t be because it is a holiday. This means that many employers will alter that pay date to December 31st or January 4th,” says Clark. “Most employers will probably opt to go with Thursday, December 31st. This will mean communicating with employees about any deductions that need to be modified.”

Having wages that would have typically been paid in 2021 get paid on the last day of 2020 not only affects how many pay periods get allocated to each year; it impacts the employee experience. “The absence of communication to employees about what is happening, why it’s happening and how it’s happening causes insecurity. The biggest impact is to the employer and making sure to get it right, because last thing you want to do is have to figure out how to reimburse all employees for all of their premiums because the deductions were taken in error.”

Get your Payroll Quarters in a Row

“October is usually when you start looking at year-end folders, trying to balance earlier quarters so that when you are getting ready to process W-2’s, you are looking at 4th quarter rather than the whole year.” Clark acknowledges that many people might be a bit off their 4th quarter game this year due to all of the extra demands and complications payroll has faced. “It is easier looking back three months, rather than twelve months, to catch errors,” she says, noting that catching up in October if you’ve fallen behind is worth the effort moving into year-end.

W-2’s & Social Security Number Notes

Clark urges the utmost accuracy when checking Social Security numbers which should be a normal part of your hiring process and employee data validation. “Make sure all Social Security numbers and other critical employee data are correct. If not, you could send a W-2 with an incorrect SS number or address.” Because accurate posting of Social Security earnings and taxes impacts a person’s retirement payment calculation, getting every number right and in the right box on the W-2 is critical.  For help with ensuring successful, accurate W-2 processing, contact Wise Consulting.

Other Payroll Housekeeping Items

Clark, who also serves as Vice President of the American Payroll Association and sits on the Strategic Payroll Leadership Task Force for Emerging Technologies, urges people to remember all of the standard payroll details that are still present in this very unusual year. “For example, it’s a good time to take note of anyone claiming exempt. If they have claimed for the whole year, you will need to notify them that in February of 2021 they will have to officially claim again. The new W-4 still has a place to mark exempt.” Please remember that employees indicating an exempt status for 2020 are required to complete a new W-4 for 2021 by February. Otherwise, employers are required to adjust their status to Single/0. Thorough auditing, communicating and updating will help avoid errors.

Clark also recommends that reporting all benefits should be taken with care. “People should make sure they are collecting and reporting group term life, personal use of company cars, relocation, third-party sick pay, stock options, and ACA cost of medical insurance. Many companies outsource benefits, which means at the end of the year, they have to report the data on the W-2, and that involves loading a huge file to the system that must be validated before and after loading to make sure all the information is in there. It’s much easier to do it every pay, but not everyone does it that way.” Revalidating to make sure all required items are captured is imperative.

COVID Response Act Credits

Clark acknowledges that many payroll teams might be struggling with the COVID factor. “The biggest ‘what if’ for year-end right now seems to be how companies are managing the COVID-response act credits. The FFCRA credits need to be accounted for, and the 941 form for Q4 has not been released yet that shows us where to put the credits. We are still waiting for that to be published. The 941 normally needs to be filed for 4th quarter by January 31st. ADP, Dayforce, UltiPro and Workday are ready and waiting for it. As soon as they have it, they are going to put system processes in place to manage it.”

Wise is on Your Side

If you could use help with any year-end details, give Wise a call. Our payroll professionals have seen it all and know how to manage COVID-related details. Reach out to start a conversation at HCMHelp@wiseconsulting.com, or call 800-654-4550.

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